On November 26, 2024, during the 8th session of the 15th National Assembly, Vietnam officially passed the 2024 Value-Added Tax (VAT) Law (Law No. 48/2024/QH15), which will take effect on July 1, 2025. This law introduces significant reforms to refine tax policies and resolve existing implementation challenges. Below are some of the most notable changes:
1. Expanded definition of taxpayers
Articles 4.4 and 4.5 of the 2024 VAT Law broaden the scope of taxpayers, particularly for e-commerce and digital platform businesses. Key updates include:
- Foreign suppliers without a permanent establishment in Vietnam who provide e-commerce or digital services to Vietnamese entities or individuals must comply with VAT obligations. In such cases:
- If a foreign platform operator facilitates transactions, it must withhold and remit VAT on behalf of the foreign supplier.
- If a Vietnamese business applying the tax deduction method purchases services from a foreign supplier via a digital platform, it is required to withhold and remit VAT on the supplier’s behalf.
- E-commerce and digital payment platforms that facilitate transactions are now obligated to withhold, declare, and remit VAT on behalf of individual and household businesses operating through their platforms.
This reform reflects Vietnam’s alignment with global trends in digital taxation, ensuring a fair competitive environment for both domestic and foreign enterprises while enhancing tax compliance in the digital economy.
2. Adjustments to VAT-exempt goods and services
Article 5 of the 2024 VAT Law revises the list of non-taxable goods and services, replacing provisions in the 2008 VAT Law and its subsequent amendments. Key changes include:
- Removal of certain VAT-exempt items, including:
- Fertilizers, specialized machinery and equipment for agricultural production, and offshore fishing vessels.
- Securities custody services, market operation services of stock exchanges or trading centers, and other securities-related business activities.
- Changes in VAT exemptions for exported products derived from natural resources and minerals:
- Previously, exported products were VAT-exempt if the total value of natural resources, minerals, and energy costs accounted for at least 51% of the production cost.
- Under the new law, only products specifically listed in the Government’s regulations will qualify for VAT exemption.
- Addition of VAT-exempt imported goods intended for disaster relief, pandemic response, and war-related aid, as specified by the Government.
3. Increase in the revenue threshold for VAT liability
Clause 25, Article 5 of the 2024 VAT Law stipulates that goods and services provided by households and individual businesses with an annual revenue of VND 200 million or less will be exempt from VAT.
Regarding its effective date, Article 18 of the 2024 VAT Law states that this revenue threshold will take effect from January 1, 2026. Currently, under Circular 40/2021/TT-BTC, which guides the implementation of the 2008 VAT Law, household and individual businesses with an annual revenue of VND 100 million or more are required to pay VAT.
Thus, the 2024 VAT Law raises the taxable revenue threshold from VND 100 million to VND 200 million. This means that, starting from January 1, 2026, households and individual businesses will only be subject to VAT if their annual revenue reaches VND 200 million or more.
4. Changes in VAT calculation for imported goods
Article 7 of the 2024 VAT Law revises the VAT taxable value for imported goods as follows:
The VAT-taxable price for imported goods will now include:
- Customs value as per import-export tax regulations;
- Import duties;
- Any additional import-related duties (if applicable);
- Special consumption tax (if applicable);
- Environmental protection tax (if applicable).
This new approach clarifies the VAT calculation compared to the current method, which is based on CIF price + import duty + special consumption tax + environmental protection tax.
Additionally, if imported goods qualify for import tax exemptions or reductions, the VAT-taxable price will be based on the actual import tax payable after exemptions or reductions.
5. Adjustment of VAT rates for certain goods and services
Article 9 of the 2024 VAT Law introduces adjustments to VAT rates for certain goods and services, as follows:
(i) Additional categories eligible for a 0% VAT rate:
- International transportation;
- Construction and installation projects carried out abroad or in non-tariff zones;
- Goods sold in isolation areas to individuals who have completed exit procedures or goods sold in duty-free shops;
- Exported services, including leasing of transport vehicles for use outside Vietnam, as well as aviation and maritime services provided directly for international transportation or through agents.
(ii) Certain products previously exempt from VAT are now subject to a 5% VAT rate:
- Fertilizers;
- Fishing vessels operating in offshore waters.
(iii) Certain products previously subject to a 5% VAT rate are now subject to a 10% VAT rate:
- Unprocessed forestry products;
- Sugar and its by-products (molasses, bagasse, filter mud);
- Equipment and tools specifically used for teaching, research, and scientific experimentation;
- Cultural, exhibition, sports, and artistic performance activities; film production; import, distribution, and screening of films.
These VAT rate adjustments will have significant economic impacts. Notably, the increase in VAT for teaching and research equipment will raise investment costs for educational institutions and research institutes. In the cultural and entertainment sectors, the higher tax rates on film production, exhibitions, and sports activities may lead to increased service costs, which could affect ticket prices and consumer spending.
Similarly, the forestry and sugar industries will face higher input costs, which could increase production expenses and final product prices. In light of these changes, businesses should reassess their financial structures, optimize costs, and improve tax management efficiency to mitigate the negative impacts of VAT rate adjustments.
6. Changes in conditions for input VAT deduction
(i) Requirement for non-cash payment proof for goods and services below vnd 20 million
Previously, under Clause 2, Article 12 of the VAT Law, goods and services purchased in individual transactions valued below VND 20 million were not required to have non-cash payment proof to qualify for VAT deduction. However, under Article 14 of the 2024 VAT Law, all purchases of goods and services must have non-cash payment proof, except for specific cases as regulated by the Government.
(ii) Additional documents eligible for input vat deduction
According to Clause 2, Article 13 of the 2024 VAT Law, for exported goods and services, documents such as packing lists, bills of lading, and cargo insurance documents (if applicable) will be accepted for input VAT deduction, except for cases specified by the Government.
These new regulations are significant for businesses, as they enhance transparency and compliance with tax laws. Requiring valid documentation, non-cash payments, and stricter invoice control will help prevent tax fraud, fictitious transactions, and the use of fraudulent invoices. On the other hand, businesses that fail to meet these conditions will not be eligible for VAT deduction, leading to higher operating costs and potential cash flow issues. This compels businesses to strengthen compliance awareness, improve accounting and financial processes, and ensure tax benefits while avoiding legal risks.
7. Additional cases for VAT refund
Clause 3, Article 15 of the 2024 VAT Law introduces a new case eligible for VAT refund: Businesses that solely produce goods or provide services subject to a 5% VAT rate can claim a VAT refund if their unrecovered input VAT reaches at least VND 300 million after 12 months or four quarters.
This new VAT refund policy is designed to support businesses in their investment and expansion efforts. It is an important change that helps improve cash flow for businesses operating under the 5% VAT rate, investment projects in conditional business sectors, businesses that have yet to fully contribute their charter capital, and export activities.
However, alongside expanding VAT refund eligibility, the new law also eliminates VAT refunds for transactions such as ownership transfers, business conversions, mergers, consolidations, splits, and similar restructuring activities. This reflects a tightening trend in VAT refund policies to prevent budget losses and ensure stricter tax management.
This key change in VAT refund policies brings significant benefits to taxpayers in certain cases, such as businesses operating under the 5% VAT rate, investment projects in conditional business sectors, and export activities. At the same time, VAT refunds for transactions involving business restructuring (e.g., mergers, consolidations, or splits) will no longer be available.
